Jack Welch. Photograph Source: Hamilton83 – CC BY-SA 3.0
We’ve become accustomed, here in the 2020s, to an endless stream of headlines that herald massive new windfalls for America’s top corporate and financial execs. Back a century ago, in the 1920s, our nation’s executive elites lived through a similarly rewarding era.
But that era would suddenly end in the mid-20th century. Business and banking chiefs would find themselves, by the 1950s, no longer luxuriating in massive manses.
Indeed, by the early 1970s, one of our nation’s top corporate leaders — General Electric chair and CEO Reginald Jones — was pulling down a mere $200,000 a year and living in a modest brick colonial just outside New York. Jones and his big-time CEO counterparts, the Economic Policy Institute has detailed, were then averaging only 20 times or so more than what their workers were making.
Top execs like Reginald Jones never raged at the relatively modest rewards coming their way. They believed, as a G.E. predecessor of Jones had believed, that executives and workers were engaging “in a common enterprise for mutual advantage.”
What had top executives in mid-20th-century America so accepting of this “common enterprise” orientation? Stiff federal tax rates on high incomes certainly had an impact on their attitudes. America’s deep pockets faced a 91 percent tax on income over $200,000 for most of the two decades after World War II and a 70-percent top-bracket tax rate throughout the 1970s. They had little incentive to insist on higher pay. Uncle Sam, after all, would be taxing most of that higher pay away.
Top execs of the Reginald Jones era also operated in an economy where unions played a pivotal and ever-present role. This labor presence and power tended to keep top execs from claiming any more than a modest share of the wealth their companies were creating. Taken together, all these dynamics combined to create a distinct cultural vibe that frowned upon greed and grasping.
So how did that greed and grasping become groovy again in the late 20th century? In the early 1980s, for starters, the Reagan White House accelerated the tax-cut fever that had triumphantly surfaced in the late 1970s. By 1986 the federal tax rate on top-bracket income had dropped from 70 to 28 percent, just a tad below the 25-percent top rate America’s rich had smiled upon back in the late 1920s.
President Reagan also significantly undercut America’s labor movement, most infamously in 1981 when he fired over 11,000 striking federal air traffic controllers. That move defiantly busted a decades-old and widely accepted taboo against firing workers out on strike.
But ending once and for all the paycheck modesty of top execs like G.E.’s Reginald Jones would end up requiring a firm shove as well from inside America’s corporate executive ranks. A top corporate exec would have to openly and unapologetically embrace unbridled avarice.
That norm-busting top executive would turn out to be, in the ultimate irony, the CEO successor to Reginald Jones at General Electric. This successor, Jack Welch, would take over G.E. in 1981 and lord majestically over the company until he retired — with a record $400-million-plus retirement package — two decades later.